Until 1991, India was a closed economy. Post 1991, a debt crisis forced the country to radically change its course and undergo market oriented economic reform. The economic liberalization was very much against the traditional Indian mindset as it did not approve of market economy, capitalism and free enterprise.
Being a closed market, there was hardly any competition for domestic companies. Liberalization brought with it numerous changes. The country saw a steep rise in Foreign Direct Investment (which is still rising). The FDI in India was $68 million in 1991 which rose to $16 billion in 2007.
Many multinational companies started setting up operations in India. Companies started outsourcing their jobs to India and the demand for Indian professionals shot up across the globe. There was an increase in competition for the domestic industries which was a blessing in disguise as these companies started improving their levels of efficiency in order to retain their market share.
Current situation:
- India continues to reduce MNF tariffs on non agricultural products and aims to reach ASEAN tariff levels on these products by the year 2009 (MFN tariff is the tariff level that a member of the GATT/ WTO charges on a good to other members).The average applied MFN tariff has dropped to less than 16% in 2006/ 2007 compared to 32% in 2001/ 2002
- Industrial policies which include reservations from small scale sectors and industrial liscencing requirements have become less restrictive
- The government strongly believes that globalization is necessary for India as it can reduce its poverty. Companies across the globe have taken advantage of the shift in the economy and started tapping Indian talent for their companies globally. Western countries look towards India for outsourcing their jobs as they can acquire skilled labour at lower costs
- Today Indian companies are holding ground in the face of competition from foreign companies. The FMCG market in India has a large number of global players. Dabur has been developing products for the Indian market since 1884. Even the tremendous competition in the industry has not been able to uproot this brand. Even today Dabur is considered a very reliable brand
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